Sunday, November 18, 2012

March of Folly: Grand Bargain style

by digby

This article at New Economic Perspectives is an enlightening and entertaining discussion of the "Grand Bargain", in the form of a letter to the president. I'll just excerpt this one passage (emphasis mine):

The Grand Bargain that you seek serves the interests of only a few special interests, the financial services industry, by enlarging the “market” for less stable and more speculative private-sourced retirement and health insurance products, sold now and in the future by Wall Street. Both political parties, including yourself, have being acting largely in the interests of Wall Street and not of Main Street, despite your calling Wall Street bigwigs at one point “fat cats”. A little extra taxation is not going to hurt the wealthy very much but cuts in social spending and overall cuts in government expenditure (as well as the lapse of the payroll tax cut) is going to hurt ordinary Americans a great deal as well as represent a significant drag on the overall economy (explained below). Again, the extra taxation on the wealthy is a distraction and a triviality compared to your apparent commitment to cutting Social Security and Medicare, a huge boon to the financial services industry and no one else.

Without an ennobling and constructive set of tasks and a reality-based discourse, the political goal of bipartisanship in Washington is not “grand” at all. A critical problem with the reflexive impulse to bipartisanship is that the two political parties currently are better representatives of two or more segments of economically-privileged opinion rather than of the American people as a whole. It is true that people pull the lever, for the most part, for one or the other major party but real, effective choice is very limited in a “first past the post” electoral system. And, you know as well as anyone, that once you and other lawmakers reach office, the relative power of the voter diminishes even further and the power of wealthy special interests increases exponentially. The current Democratic and Republican Parties are able to compete with each other for attention and “stir up enough dust” to temporarily distract many voters from the essential distance between the concerns of official Washington and Main Street. The mainstream media outlets have been collaborating in creating the appearance of differences between the two Parties but as you have admitted on more than one occasion you share a lot of common positions with your now vanquished opponent, Mitt Romney.

Also, apparently, you are very much attracted to the notion of sacrifice and “shared sacrifice” which also might be meaningfully linked to the notion of national grandeur and greatness: one sacrifices for others to make the nation, the group or the team greater and better. You know, you are probably right that in some areas more public-spiritedness and sacrifice of individual wants and needs may be desirable. Yet you have chosen to praise and seek to impose sacrifice on others in an area where, for ordinary people, for the most part, sacrifice is gratuitous and damaging.

You and your advisors are diverting people’s natural impulses to help other people to a false and actually a counter-productive goal, reducing the budget deficit. It would be far better that Americans would, for instance, sacrifice trips in fuel inefficient vehicles, until such time that they have workable low- and zero-emissions options, than to pay more income taxes to reduce a budget deficit. Or that some Americans choose careers that are not the most remunerative but serve public needs, like teaching school, social work and sustainable agriculture, and yet can get adequately rewarded for their work. These are real individual and group sacrifices for the good of the country not phantom sacrifices for a false ideal.

The notion that it is awe-inspiring or grand to unite the two major political parties around the narrow interests of Wall Street is to make a mockery of the idea of a grand sweep or arc of American history. Or to invoke individual sacrifice and people’s desire to help to address the phantom issue of the public debt is, as you will see below, an outrageous misappropriation of people’s desire to help others. It’s a travesty of grandeur and of greatness, the grandeur and greatness you aspire to as President.

Please read on for an excellent take on why the entire discussion is a relic of the days of the gold standard and why the idea of budget deficits in this context is simply ... wrong.

America going broke is literally impossible. The risk of inflation and the wrath of the invisible bond vigilantes in the future is possible ... but nowhere is it even hinted at in current reality and this obsession with slashing spending is likely to do here what it has done in Europe --- that is, slow this weak economy down. And I'm afraid that at this point you have to assume this is what these people want to do. After all, they have the example of the UK where they raised taxes and cut spending and have gotten themselves right back into a recession.

It appears to me that the overarching political goal of the Democratic Party here, aside from delivering for their benefactors, is to break Grover Norquist's hold on the Republican Party. This is a worthy goal, but the price for doing that, especially right now, is going to be very steep. Too steep. Average Americans will be "sacrificing" for decades to get it done. Meanwhile, there's always another Grover out there and Republicans will always cut taxes the first chance they get. It's definitional. Making it possible to raise taxes in order to fix an illusory problem is an unworthy goal at a time like this. With an economy this weak, their first obligation is to do no harm. And making the American people suffer for the Democrats' failure to properly counter GOP propaganda is cowardly.

The obsession with "raising revenue" which is all they are talking about on the Sunday Morning shows, is folly. If it succeeds, history will judge it harshly. Possibly even "Neville Chamberlain" harshly.